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Using owned first house as a down payment on a second house?


I am nearly paid off on my first house, and I would like to purchase a second house using my first house as down payment. I have a good credit, but I just do not have the cash for 20% down payment. Would a bank accept an equity in the first house as a down payment, or should I get a separate equity loan on the first house to use as a down payment? I am thinking having two loans would hurt rather than help. Thanks.
  • November 15 2013 - US
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Answers (8)

I would say the best route to go is to get a cash-out refinance on your first home. Then you can use that to fund the down payment on your new second home. This will likely be the most practical option that you have at the moment. Either way, I recommend you speak with a lender like myself so we can give you more information about this process. We would be happy to speak with you to help you get the loan that you need. So if you have any other questions or need a loan, please contact me through the information on my profile page. I hope this helps and good luck!
  • November 18 2013
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 cash out refinance with the first home and use proceeds 

good luck


omar khamisa
  • November 16 2013
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Do not bite more than you can chew. First you need to do the Maths. What is the amount you can set aside for servicing the new loan. What is your expectation regarding increase in value of the 2nd property. In what manner do you plan to use the 1st property. Are you planning on buying a new home or a resale property. Would a reverse mortgage work for you? Be cautious.
  • November 16 2013
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Profile picture for RealEstateCrew
Depends on what bank you ask. 
  • November 16 2013
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Profile picture for JustinLeffew
Do you plan on keeping both homes? If so, getting a fixed rate cash-out mortgage on the first would be a better option (in my opinion) than getting an adjustable HELOC. You could then use that money for a down payment on the new home. Either way, you'll have to qualify with both mortgages. If you wait until the first is paid off, you will still need to count your taxes and homeowner's insurance against your debt to income ratio for the first home, in addition to the new 2nd.
  • November 16 2013
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Profile picture for junkmail54
Thanks for the information.  I will be paid off next year, and any purchase would be afterwards.  My current house is about $300K, and I am thinking that second house would be around $400K, which would make my down payment requirement around $80K.  I could save for it when the first mortgage payment stops, but I want to take an advantage of the current rate.

It looks as though a home equity loan would be the best option.  

Thank you all.
  • November 15 2013
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No they will not accept an ownership percentage of the first house. Having two loans doesn't help. You'll have to qualify to be able to service the two loans. You need to get the first loan applied for if you're planning on buying right away. If you could get the new loan and wait 60 to 75 days before applying for second loan it might save you some documentation requirements.

How much money do you need for the down payment? How much do you owe on your current house? What is the rate on the nearly paid off loan? How is your cash flow situation? Are you going to rent the old house out?

All of these are things you should be considering, and the info would help you receive and informed answer from the Zillowers.
  • November 15 2013
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You can do an equity line of credit or cash out refinance with the first home and use the line or proceeds from cash out for the down payment. You may want to look more closely at the cash out. This way, you can lock in your payment (vs. the payment going up when the interest rates rise).
  • November 15 2013
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